Borrowing exceeds forecasts
The government borrowed £97.8 billion ($116.8 billion) over those six months and incurred £60.8 billion in debt interest. An editorial in Bloomberg Government's Daily Tax Report warns that higher borrowing costs alone could consume nearly half the fiscal buffer inherited from Healey's predecessor. It urges him to simplify Britain's accumulated budget measures rather than introduce another proposal that risks credibility for little revenue.
September's figures added to the borrowing shortfall. Data published by the Office for National Statistics on October 21 put public sector net borrowing for the month at £24.5 billion, exceeding the Office for Budget Responsibility's March forecast by £1.9 billion. Central government debt interest reached £10.9 billion, a September record in the monthly series dating to 1997, before adjusting for inflation.
Public sector net debt also passed £3 trillion for the first time. The ONS provisionally estimated it at £3,005.0 billion at the end of September, up £91.7 billion from a year earlier. Debt stood at 94.0% of GDP, a level last seen in the early 1960s.
Spending promises and the fiscal buffer
The Institute for Fiscal Studies warned on October 12 that Healey faces a £35 billion funding challenge if he wants to fulfill defense and health pledges without cutting other public services. Those commitments include raising defense spending to 3% of national income by 2030. According to BBC News, the think tank said his options were spending cuts, tax increases or a combination of the two.
The IFS still expects the government to meet its fiscal rules, though with about £20 billion of headroom, compared with the £24 billion projected by the OBR at the March 2026 Spring Statement. It also expects any household cost-of-living relief to be temporary and modest in scale.
One specific commitment is Healey's promise to cover the Defence Investment Plan's £4.7 billion funding gap, according to a Press Association Budget preview published by The Standard. Of the additional £15 billion pledged to the UK defense sector under the plan, £10.3 billion has been funded. The extra money is intended to bring defense spending to 2.7% of GDP by 2027.
On the tax side, the Press Association reports that Healey is considering lifting the surcharge on bank profits from 3% to 8%, reversing a cut introduced by former Chancellor Jeremy Hunt. The Trades Union Congress supports the increase and estimates it would generate £2.25 billion annually. City representatives argue that it would discourage investment in Britain.
Debt costs and inflation
A House of Commons Library briefing published October 22 says government debt-interest spending has more than doubled since 2019/20. Interest now accounts for £1 out of every £13 the government spends, reflecting higher interest rates and inflation.
The briefing says oil and gas prices remain elevated because of the Middle East conflict, with inflation forecast to exceed 4% in early 2027. The Bank of England is expected to raise interest rates for the first time in 2026 as it seeks to return inflation to its 2% target.
Updated forecasts due on Budget day
The OBR will release revised economic and public finance forecasts alongside Healey's October 28 statement, the House of Commons Library confirms. Its previous forecast was finalized in March 2026, before the Middle East conflict escalated. The new five-year projections will reach 2031/32 for the first time.
